Finance Minister
Penny Wong
appears to have conceded that Labor will be unable to forecast a surplus in the budget over the coming years, saying only that the government’s fiscal ­strategy will be “transparent to all".

The concession came as senior ­economists warned the failure by both sides of politics to address a structural deficit meant the government now faced a significant budgetary crunch.

The AFR Weekend revealed cabinet’s expenditure review committee had given up on delivering a surplus over the four-year budget cycle, known as the forward estimates.

This would be another blow to Labor’s economic credibility after it was forced to concede late last year that it would be unable to meet its “iron-clad guarantee" of a surplus in 2012-13.

Senator Wong refused on Sunday to confirm Labor was unable to deliver a surplus in the forward estimates. Instead, she highlighted an “unusual set" of economic circumstances that had led to a collapse in company profits and weaker than expected revenue ­collections.

“The budget will certainly comply with the government’s medium-term fiscal strategy, which has the objective of surpluses over the economic cycle," she told Sky News.

“We will ensure our forecasts are there and transparent to all. The government has always said you make the right economic calls for the times. “

Changes to superannuation announced on Friday are projected to save $10 billion over 10 years but only $365 million over the forward estimates. In addition, Labor has pledged to outline in the budget how it will fund its national disability insurance scheme and education reforms, although they do not require significant expenditure in initial years.

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Shadow treasurer
Joe Hockey
said it was fiscally irresponsible to continue delivering deficit budgets for years to come.

“It wasn’t that long ago the Prime Minister was telling us getting back to surplus is “the best thing we can do to help families with cost of living ­pressures," he said. It was a “guaranteed" promise, come “hell or high water".

“Letting this information seep out is no way to run a government."

JPMorgan Chase chief economist Stephen Walters said it had become clear to the government since Christmas that the economic hole was a lot deeper than it had expected.

“And I think the pile of spending keeps mounting up and the combination of those two without material ­policy changes makes it very, very hard to get the budget back into surplus, remembering that on our estimates it is in quite significant structural deficit to start with," Mr Walters said.

He predicted the deficit would be about $15 billion this year and $5 billion next, with a small surplus in the following two years.

“But we are assuming quite decent growth rates over that period."

Macro-economics director Stephen Anthony, who predicted the government would be unable to deliver a surplus, said only windfall ­revenue gains from better than expected terms of trade would help return the budget to the black.

“What could have been a relatively smooth adjustment period through the latter stages of the mining investment boom becomes harder for government and harder choices have to be made by government," Mr Anthony said.

“But I don’t take any great glee in being vindicated.

“Fundamentally they are in the wrong position – ever since [the Labor Party] was elected it promised to do a root and branch review of spending but it never did that [and] it has only ever tinkered around the edges of the ­spending pie and so it hasn’t addressed the structural problems in the budget," he said.

“It is like its predecessor and has relied on revenue windfalls to do the job."